Redeye VC

Josh Kopelman

Managing Director of First Round Capital.

espite being coastally challenged (currently living in Philadelphia), Josh has been an active entrepreneur and investor in the Internet industry since its commercialization. In 1992, while he was a student at the Wharton School of the University of Pennsylvania, Josh co-founded Infonautics Corporation – an Internet information company. In 1996, Infonautics went public on the NASDAQ stock exchange.

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This year I mean it -- its a bubble!

Bubble_2We live our lives by routines.  In January, we all make resolutions for the new year.  In November, we give thanks for the bounty of the harvest at Thanksgiving.  And for those in the tech industry, in October we go to the Web 2.0 Conference and try to outdo each other with our declarations of "Bubble 2.0".

Today's NY Times story declares that "Silicon Valley’s math is getting fuzzy again."  This sounds somewhat similar to their story last year which concluded that: "Web 2.0...has in recent months become the focus of dot-com-style hype in Silicon Valley..."

As people leave the conference this evening to write their obligatory "we're in a bubble" story, I thought it would be helpful to provide them with examples from the last few years, so they can find new ways to express the same thoughts...


2004

"To be sure, conference organizers seemed aware of the possibility of a looming hype machine. One panel early Wednesday featured stock analysts mulling the thesis: Is it a bubble yet?" - CNet News.com

"The web is entering another bubble of optimism..." - Read/Write Web

"No greater shroud hangs over Web 2.0 then the fear that we'll repeat the financial mistakes of the past..." - IT Conversations

"The Web 2.0 conference was an online lovefest, where an array of speakers repeated that the Internet is still in its infancy. A panel of financial analysts and venture capitalists questioned whether the industry is going through another bubble.." - SF Chronicle

 

2005

“The industry is still tingling from the loud and sweaty Bubble 2.0 — whoops, excuse me, Web 2.0 — conference here late last week.” - USA Today

“No Web 2.0 Bubble? Hmmm.... even the backers of the recent Web 2.0 conference warned that things were getting frothy” - Business Week

"I heard many people say it felt very bubblelike. in fact, every party or event seemed like a lead in to this topic." - Mark Pincus

“What was a budding movement three years ago, at the dawn of the revival in technology, internet, and silicon valley, has become a full blown mania.” - Fred Wilson

"At the Web 2.0 conference, I'm sensing the buzz of a bubble" - Read/Write Web


2006

"Are we in a bubble? Absolutely" - Read/Write Web

"Web 2.0 was the same dance all over again: this tech bubble, boomy, exuberant thing that happens when money hangs like a bumper crop in an orchard.  At the conference, I swear there was a ka-ching sound in every techie's step." - USA Today

"For industry players, many of whom lived through the dot-com crash, the surging wave of new Web companies and the corresponding media buzz can mean only one thing: an investment bubble where too much money is chasing too few good ideas." - CNet News.com

"(Did someone say bubble? Not at this conference, please!)" - SFgate.com

"It isn’t dot-com bubble level, I’m told, but darn close." - Forbes

 

Even a broken clock is right two times a day.  By proclaiming a bubble every year, everyone can say they "called it." 

Comments

Nik

Josh,

This is really great. Nowadays, people are so contrarian that its become the dominant thought.

Taken a print out of this post.

Nabeel Hyatt

I love how many of these are from the same sources - I wonder how many are from the exact same authors?

CPinto

There's a lot of wishful thinking going on. If you ask people why they say we're in a bubble ready to burst few can back their claims.

I believe Scott Rafer[1] nailed better than everyone else when he said he believes we're in a cycle.

And to me this is better evidence than simply saying "there's a lot of money being spent on buyouts". When is "lots of money" too much money?

[1] http://foundread.com/2007/10/16/un-sexy-is-good-business-and-other-rules-from-scott-rafer/

Richard MacManus

Oh man, busted! I'm actually more ashamed that I was so unimaginative in my quotes. :-)

Graeme Thickins

funny stuff, Josh -- the theme that never dies

TedC

Define bubble.... Where is the material value? We are seeing the elemental foundations for the new web building. In the bubble are those who are here on the surface and they are contained in their self-generating hype-fusion reactor and can only last on their own energy for so long. It is a bubble, but it's not "The Bubble" like before. There is solid ground and knowing where to stand post effervescence will be be key. Get grounded...http://tinyurl.com/2wnrdg

Charlie Crystle

bubblicious.

the bubble keeps expanding. At some point it becomes a globe, bloody planetary. gets its own gravity. and then, end of bad metaphor.

man, i'm boring myself.

TedC

No bubble.... ? http://wiki.startupcamp.org/wiki/StartupCampNYCAttendeeList

Don Jones

After the really big bubble, there's a bubble around every corner.

Richie

While there is definitely a bubble approaching its not as bad. While there are companies getting overfunded and companies getting funded because of eyeballs or "we'll figure out the model later" (like twitter) there are several important differences.

1) First and foremost is the valuations are all private, very few public companies are bubbling (except Google which is insanely overvalued) opposed to the last time around when the biggest bubble was public. When it crashes, the market and the average person won't really feel the crash.

2) Eyeballs actually have value now. In the first bubble crash online advertising was worthless. I was running an online ad network and we built a social networking site - and we shut it down because we determined that in 2002, social network traffic was literally worthless - we couldn't earn back our hosting bills and we were an ad network. This time around there is real dollars online. It's hot. You walk down the street you hear people talk about online advertising. Back in 02, you said online advertising, they told you to get a real job.

While there is a bubble. Google is insane, facebook is absurd and Ning doesn't make any sense. There are dozens of funded startups that are going to go to hell (iminlikewithyou) and ones that will likely never make a dime (twitter) its still not the pie in the sky gazillion dollar valuations of companies that converted cash into compost (webvan). We also don't hear people saying it's okay to spend $200 to sell a $10 bag of dogfood for $7.75.

Whenever there is innovation and people have money, bubbles will form but the same bubble rarely repeats itself twice in quite the same way. For example Oil in the 70's stifled the country, Oil today is a pain but not a big deal - even though its all bubbly bullshit price rigging.

The same mistakes will happen all over again. We are human, we get excited. We want to live the dream. Investors want to live the dream vicariously and seek the alpha dog. Entrepreneurs seek the smell of success. Its life its love, its us. However while we always make the same mistakes, there are generally slight improvements each time.

So until the next sector goes crazy I'm not going to worry so much.

Richie "the bootstrapper" Hecker

While there is definitely a bubble approaching its not as bad. While there are companies getting overfunded and companies getting funded because of eyeballs or "we'll figure out the model later" (like twitter) there are several important differences.

1) First and foremost is the valuations are all private, very few public companies are bubbling (except Google which is insanely overvalued) opposed to the last time around when the biggest bubble was public. When it crashes, the market and the average person won't really feel the crash.

2) Eyeballs actually have value now. In the first bubble crash online advertising was worthless. I was running an online ad network and we built a social networking site - and we shut it down because we determined that in 2002, social network traffic was literally worthless - we couldn't earn back our hosting bills and we were an ad network. This time around there is real dollars online. It's hot. You walk down the street you hear people talk about online advertising. Back in 02, you said online advertising, they told you to get a real job.

While there is a bubble. Google is insane, facebook is absurd and Ning doesn't make any sense. There are dozens of funded startups that are going to go to hell (iminlikewithyou) and ones that will likely never make a dime (twitter) its still not the pie in the sky gazillion dollar valuations of companies that converted cash into compost (webvan). We also don't hear people saying it's okay to spend $200 to sell a $10 bag of dogfood for $7.75.

Whenever there is innovation and people have money, bubbles will form but the same bubble rarely repeats itself twice in quite the same way. For example Oil in the 70's stifled the country, Oil today is a pain but not a big deal - even though its all bubbly bullshit price rigging.

The same mistakes will happen all over again. We are human, we get excited. We want to live the dream. Investors want to live the dream vicariously and seek the alpha dog. Entrepreneurs seek the smell of success. Its life its love, its us. However while we always make the same mistakes, there are generally slight improvements each time.

So until the next sector goes crazy I'm not going to worry so much.

Jake Kaldenbaugh

I'd like to see an analysis of how quickly successful startups are growing and how quickly they are achieving profitability. The real analysis to assess whether we are in a bubble or not is whether valuation multiples have risen to a point that exceeds the new standards of growth. My thesis is that startups are faster growing, reaching profitability sooner and leverage more scalable business models than ever before. Multiples always reflect growth rates and expected profitability.

jamie dalgetty

i think its safe to say that the internet is here to stay! :)

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